FEDERAL CIRCUIT CASES
Federal Circuit Vacates Lower Court’s Obviousness Finding Based on Incorrect Application of Inherency Doctrine
In Par Pharmaceutical, the Federal Circuit vacated an obviousness ruling by the district court, finding that the court misapplied the doctrine of inherency in its obviousness analysis. Plaintiff, Par, sued TWi for infringement of U.S. Patent No. 7,101,576 (“the ’576 patent”), which related drug called megestrol that was used to fight anorexia and cachexia in AIDS patients. The particular method claimed use of nanosized megestrol formulations for greatly reducing the food effect. A reduction in the food effect was especially vital for AIDS patients undergoing wasting, as those patients often have substantially reduced appetites. Par marketed its megestrol formulations as Megace ES, and generated more than $600 million dollars since 2005.
TWI’s principal argument at trial was that the ’576 patent was obvious in light of the prior art. After a five day bench trial, the district court agreed with TWI and concluded that the ’576 patent was invalid as obvious. Although, the district court noted that the prior art did not explicitly disclose the food effect as claimed, it nonetheless found that the food effect was an inherent property of the drug, megestrol.
Reviewing the district court’s determination de novo, the Federal Circuit vacated the obviousness decision based on an incorrect application of the inherency standard. Although, the court reiterated that inherency is applicable an obviousness analysis, it stated that inherency is limited when applied to obviousness, and is present only when the limitation at issue is the “natural result” of the combination of prior art elements. The Federal Circuit found that the district court applied the incorrect standard for inherency but noted that because of an insufficient record, it could not conclude that TWi failed to present sufficient evidence to show that the claimed food effect was necessarily present in the prior art. Thus, the court vacated the lower court’s inherency analysis and remanded.
Par Pharm., Inc. v. TWI Pharms., Inc., No. 2014-1391 (Fed. Cir. Dec. 3, 2014).
DISTRICT COURT CASES
District Court Calculates Award of $122k in Sanctions for Discovery Abuses
In Zest IP Holdings, the Southern District of California determined what a reasonable amount of sanctions was for defendants’ discovery abuses. Plaintiff Zest sued Implant Direct for patent and trademark infringement over Implant’s GoDirect and GPS products. The patents-in-suit related to dental attachment products.
Over the course of the case, Zest filed a motion for spoliation and discovery abuse sanctions against Implant, seeking reimbursement of $224,711.68. Defendants argued that the requested fees were unreasonable and excessive. Although the court found that Implant acted in bad faith, it nonetheless reduced the award down to $122,486.95.
To calculate a reasonable amount for sanctions, the court used the lodestar method, multiplying the number of hours Zest reasonably expended on the litigation by a reasonable hourly rate. The court noted that the burden to demonstrate the reasonableness of the number of hours spent was on Zest, and included a good faith effort to exclude hours that were excessive, redundant, or otherwise unnecessary. Implant had the burden of rebuttal, which required evidence challenging the accuracy and reasonableness of the hours charged or the facts asserted by Zest. The court also explained that once calculated, the lodestar amount is presumptively the reasonable fee amount and could be adjusted only in “rare and exceptional” cases.
The court analyzed the fees in some detail and made findings. It concluded Zest’s hourly rates for attorneys were reasonable but found that the paralegal rate was not. The court also granted Implant’s objection to costs incurred in preparing the statement of costs—a sum of about $26k. The court also reduced the amount because of duplicative attorney time and criticized Zest’s attorneys for billing by the quarter-hour. Based on the various reductions, the court determined that a reasonable amount of sanctions to be awarded to Zest was $122,486.95.
Zest IP Holdings, LLC v. Implant Direct Mfg., LLC, No. 10-cv-0541-GPC-WVG (S.D. Cal. Dec. 3, 2014).
- Author: Rehan Safiullah
Failure To Comply With BPCIA Mandates Precludes A Declaratory Judgment Suit
In a slip opinion, the Southern District of New York Court recognized that the BPCIA statutory framework governs the dispute resolution process for disputes relating to the manufacture and marketing of biosimilar products (e.g., biologic drugs which are “highly similar” to an already FDA approved “reference product”). While a reference product enjoys exclusivity for a period of twelve years, the BPCIA provides for a relatively quick and inexpensive methodology for biosimilar manufacturers to gain FDA approval for their drugs which have ‘“no clinically meaningful differences’” from the reference product. The BPCIA includes a dispute resolution mechanism that is designed to ensure that patent disputes are resolved before the reference product’s exclusivity period terminates. The dispute resolution process mandated by the BPCIA includes the exchange of information and various notices to the parties. The court noted that, even had it not already found that the matter involved no actual case or controversy, the failure to adhere to the dispute resolution process set forth in the BPCIA will preclude the manufacturer of a biosimilar product from seeking a declaratory judgment of patent invalidity against a reference product sponsor.
Celltrion Healthcare Co., Ltd. V. Kennedy Trust for Rheumatology Research, 2014 WL 6765996 (S.D.N.Y. Dec. 1, 2014).
- Author: Janie Shannon
District Court Orders New Trial on Damages In Light of Virnetx, Inc. v. Cisco Systems, Inc.
On November 25, 2014, the Northern District of California granted-in-part Defendants Fairchild Semiconductor International, Inc. et al.’s (“Fairchild”) Renewed Motions for Reconsideration of Order Regarding Fairchild’s Renewed Motion for Judgment as a Matter of Law, New Trial, and/or Remittitur. In doing so, the Northern District of California reconsidered its prior denials, and granted Fairchild’s motion for a new trial on damages.
At trial, Plaintiff Power Integrations, Inc.’s damages expert, Mr. Putnam, provided a damages opinion for the jury based on the expected harm of Fairchild’s infringement. In doing so, Mr. Putnam testified that “[i]f you have got competitors where the sale of the product causes the patentee to lose something . . . you don’t apportion [damages to only the patented features].”
Apportionment Requirement for Patent Damages
It has been a longstanding requirement that a patentee “must in every case give evidence tending to separate or apportion the defendant’s profits and the patentee’s damages between the patented feature and the unpatented features . . . [or] that the profits and damages are to be calculated on the whole machine, for the reason that the entire value of the whole machine, as a marketable article, is properly and legally attributable to the patented feature.” Garretson v. Clark, 111 U.S. 120, 121 (1884). Subsequent Federal Circuit precedent has provided further instructions on calculating damages in technical cases where claims are drawn on an individual component of a multi-component product and, when using a “royalty base claim encompassing a product with significant non-infringing components,” the patentee should identify and bases its damages on “the smallest salable infringing unit with close relation to the claimed invention.” See Virnetx, Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1327 (Fed. Cir. 2014) (quoting Cornell Univ. v. Hewlett-Packard Co., 609 F. Supp. 2d 279, 285 (N.D.N.Y. 2009)).
In VirnetX, the Federal Circuit provided additional clarification on when apportionment must occur. VirnetX’s damage expert had claimed to identify the smallest salable infringing unit and calculated a royalty based on that identification. See id. at 1325-26. On appeal, Cisco Systems, Inc. argued that the lower court’s jury instruction, which stated “In determining a royalty base, you should not use the value of the entire apparatus or product unless . . . the product in question constitutes the smallest salable unit containing the patented feature,” improperly suggested that when using a smallest scalable infringing unit, no further apportionment is needed. See id. at 1327. The Federal Circuit agreed, and held that the patentee must in all cases apportion between the patented and unpatented features. Even where a patentee identifies the smallest salable infringing unit, “the patentee must do more to estimate what portion of the value of that product is attributable to the patented technology.” See id. at 1327-28.
The VirnetX Opinion Required District Court to Reconsider Its Opinion
The court found that the Federal Circuit’s opinion in VirnetX provided a clarification that represented a material difference in law from that which was presented to the court and, therefore, Fairchild had shown good cause for reconsideration. Next, the court reviewed the testimony of Mr. Putnam, who disclaimed reliance on the entire market value rule, and focused on a royalty based on expected harm. Despite Power Integrations’ argument that VirnetX did not require apportionment on its expected harm theory, the court held that VirnetX mandated a new trial on damages. The court noted the “Federal Circuit’s clear directive [in VirnetX] that no matter what the form of the royalty, a patentee must take care to seek only those damages attributable to the infringing features.” Because Mr. Putnam’s analysis did not undertake any apportionment, the court concluded that the prior jury lacked sufficient evidence upon which to base its damages award and, consequently, a new trial on damages is required.
Power Integrations, Inc. v. Fairchild Semiconductor International, Inc. (N.D. Cal.) (Nov. 25 Order).
PATENT TRIAL AND APPEAL BOARD
PTAB Finds That Identical Prior Art Cited in Separate Petitions for Inter Partes Review May Lead to Different Results
On November 21, 2014, The Patent Trial and Appeal Board (PTAB) denied the petitioner’s request for rehearing of an earlier decision partially denying institution of inter partes review. In the earlier decision, the board had instituted inter partes review on claims 7-11, but had denied review of claims 1-6 and 12. In its request for rehearing, “[the petitioner] contends that its petition presented the ‘same evidence’ that was presented in [two other petitions requesting review of the same patent brought by different petitioners] and that because the board found ‘equivalent disclosures of [a prior art reference] sufficient to anticipate and/or render obvious claims 1-6 and 12 in those cases, we must do the same here.”
In rejecting petitioner’s argument, the board found that the evidence (three different expert declarations) presented in the three petitions was not the same evidence because “[t]he differences between [the expert’s] declaration in the present case and the one submitted in the [related] proceeding are material, and lead to the different results in our institution decisions.”
The petitioner also argued that “[the board’s] ‘conflicting decisions’ in this and [related proceedings ‘undermine the predictability and uniformity of decision making by the PTAB. The board disagreed, stating that the decisions were not in conflict “because of the different records presented in each case . . . . The question before the board is whether petitioner has shown that the record in this proceeding establishes a reasonable likelihood that claims are unpatentable.” Further, Judge Crumbley noted that “[i]nter partes reviews are adversarial, adjudicative proceedings . . . [t]he rule [the petitioner] proposes—that every petition citing the same art must be decided identically, regardless of the arguments set forth in the petition—ignores the adversarial, adjudicative nature of an inter partes review.”
Petition for Inter Partes Review by Mitsubishi Plastics, Inc., IPR2014-00524 (PTAB November 21, 2014, Order).
- Author: Jay Tatachar
